How Wealthy Parents Can Build Legacies by Raising Happy, Grounded, and High Achieving Children
Wealthy families, while they have a great deal of privilege, also take on significant responsibility for raising well-rounded children. Many fear their child may become spoiled, entitled, and selfish due to the availability of riches. Rich kids have the stereotype of being trust-fund babies who get everything handed to them, and the parents must find ways to stop that from becoming a reality. On the other hand, it’s crucial to provide children with the tools needed to grow their legacy and keep it alive. Creating the perfect balance of humble and hard-working can help a child grow to be successful, well-adjusted, and happy.
Introducing Children to Money
Open and transparent conversations are the only way that children in wealthy families will understand how to handle their wealth. The idea should be introduced as soon as possible in small ways. Be transparent about the wealth in your family to facilitate productive conversations. Explain to them that there is money available should they ever need it, but hopefully, they never will as they’ll be able to work for their own money.
For instance, a 5-year-old with a piggy bank and a weekly allowance can be taught how to save their money rather than waiting until they’re a teenager. This helps by enforcing good habits while they’re still young to carry on as they grow older. Along with managing a piggy bank, young children can be taught how to set money goals for themselves and understand receiving a set allowance. Be sure to explain that just because there is money does not mean they are entitled to it. Be firm with your allowance, and don’t provide more as soon as they blow through it.
To teach work ethic in younger children, make them work for the money to earn it. Even though you can provide it, it will teach them discipline if they have to earn it themselves. Younger children require family contributions in order to earn their allowance. Some tasks include picking up their toys, making their bed in the morning, or practising proper manners.
As they grow older, they grow their responsibilities. Teenagers should earn a part-time job to understand the value of earning their own money. Not only should they work for their wages, but the conversations surrounding money should become increasingly more in-depth. Encourage open conversations where your child can ask questions regarding money, savings, and investments. Motivate them to come up with ideas on how they want to spend and save their money, and listen to any thoughts they have. Having open conversations with full transparency will make it much easier for your child to navigate managing their wealth.
Creating Good Habits
It is important to start enforcing smart spending habits at a young age. To begin with, manage your child’s expectations of your generosity. Be sure to set firm limits on the amount of money you will provide them, and don’t let them push those boundaries. Giving them everything they want whenever they ask will not teach them good habits but will instead teach them that being entitled and spoiled will get them what they want. For younger children especially, it can be tempting to give in to temper tantrums. However, that will not be productive in the long run.
While they’re still young, teach them the basics of goal setting. One way to do so is by setting a monthly savings goal with a reward at the end of the month if they meet the goal. Explain to them how they can measure their progress and manage their savings in order to reach their goals.
However, it is important to remember to let them fail. Sometimes, they won’t meet their goals, and you can’t protect them forever. Help them understand the importance of money management by not giving in when they blow through their allotted amount. In the future, they will be glad you taught them how to properly manage their money and form good saving habits.
Another way to enforce good habits with money is to encourage them to pursue making their own money as they grow older. Teenagers should be pushed to find a part-time job on their own, rather than having one provided to them by the family. If you plan on having them take over a family business and want to expose them to it early on, provide them with a low-level position where they’ll need to work hard and earn the respect of the employees. As they grow in the workplace, they can be allowed to shadow other employees and learn the mechanics behind the other positions.
Show them that hard work is valued by celebrating their accomplishments. Whether it’s earning a good grade, securing a part-time job, earning their own money through a side hustle, or being awarded a scholarship, celebrate the achievements. Praise them for earning their money through chores, volunteering, and receiving good scores to help develop their work ethic. This will teach them that their hard work is appreciated and that there is value in earning things for themselves.
Another great habit to implement is giving back to others and sharing their wealth. Even young children can be taught this while managing their piggy bank savings. Explain to them how much they should allow for saving, spending, and giving to charity. Requiring a portion of their money to be donated while they are still young will teach them generosity for when they start to earn their own money. Aside from donating to charity, encouraging them to volunteer frequently and choose an organization they want to get involved with can be good. They will be able to find an organization that they’re passionate about and understand the value of giving back.
When they have money saved up, guide them on how to be a wise consumer. However, let them make their own decisions and spend their money how they wish. If they mess up, they will learn from their mistakes and understand the problems that arise with irresponsible spending. Don’t immediately hand them more money, but teach them to be patient as they earn back what they spent.
The most important way to create good habits is by leading by example. Children learn from their parent's actions more than their words. Keep this in mind as you go about managing your money and ask yourself if you would be okay with your child mimicking your behaviour. Demonstrate by example how to save your money, what to spend it on, and how much to give to charities or philanthropies. You can also model how to make smart investments and manage the stock market. Your child will see your spending habits and learn from the modelled behaviour.
Keeping the Legacy Alive
Aside from the worry of spoiled or entitled behavior, wealthy parents have the responsibility of teaching their children how to carry on their legacy and accumulate their own wealth. While good spending and saving habits can be taught throughout their childhood, more complicated topics need to be explained as well.
Be open about the family’s finances and how the money is distributed. Explain how you pay for certain luxuries and where exactly the money is coming from. The more they understand, the more they’ll be able to apply to their own expenses. When they reach the appropriate age, teach them the basics of money management. Explain concepts such as creating and following a budget as soon as they start earning their own money, either from an allowance or from a part-time job.
Include your child in financial decisions and meetings. If you have a financial advisor, allow your child to meet with them and attend meetings with you to see it firsthand. Allow them to ask questions, and be sure to thoroughly explain any concepts they have trouble understanding. Some important topics to cover are the stock market, inflation, risky vs. conservative spending, investments, and politics’ influence on the market.
Let them know that there will be conditions on what is passed down to them and it will not be given away for free. Examples of conditions could be holding a job for three years before working at the family business, or requiring them to graduate college. Another great idea is to have them pay for part of their education and come up with a financial plan for how they’ll be able to do so.
Tailor lessons to their interest in order to get the most out of it. Some children may have a greater interest in finances and stocks, while others may prefer the humanities and philanthropic endeavors. Find where their passions lie and advise them on those areas. They will be grateful to have an understanding about the things they’re passionate about, and you won’t have to worry about leaving your legacy in the past.
Behavioral Adjustment
Kids in wealthy families often have more than others could ever dream, from multiple staffed households to flying private, which can rob them of the motivation to work for what they want. Wealthy children often struggle with lack of determination and self-esteem, which can cause them to turn to drugs and alcohol to deal with these feelings and, in turn, can cause behavioral problems.
If your child has behavioral issues that you cannot seem to combat alone, or if you want to ensure that they are on a healthy path to avoiding behavioral issues in the future, it is okay to get assistance in helping them adjust. The Veda Group is a trusted group of specialists in private education and wellness, offering services such as wellness services and treatment for crisis situations. Our services can help improve your child’s mental health and overall wellness, ease behavioral issues, and manage challenging crises while helping them become grounded. For more information or to book a free consultation, please visit www.thevedagroup.com.